Ethereum
Why Ethereum Fails to Keep Up with Bitcoin and How Solana Could Benefit – DL News
- The price of Ethereum in Bitcoin hit a multi-year low in April.
- Several factors suggest that the gap between the two could widen.
Investors are losing confidence in Ethereum as the cryptocurrency continually fails to keep pace with Bitcoin’s outsized gains.
And things could get worse for the world’s largest altcoin.
Not only are there chances that a US Ethereum spot exchange-traded fund will be approved in May. abandonedBut Ethereum exchange-traded products suffered outflows worth $34 million last week, according to CoinShares data, making it the only asset group among these CoinShares tracks to see a net outflow since the beginning of the year.
“ETH sentiment is anecdotally at its lowest in years, despite recent developments such as BlackRock’s BUIDL fund,” said Luke Nolan, research associate at CoinShares. DL News.
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The diminishing optimism comes as smaller altcoins, like Solana, have attracted investors who do not expect Ethereum investments to generate as high returns as in the past.
A market driven by Bitcoin
In previous bull markets, Bitcoin outperformed other cryptocurrencies early in the cycle – a trend that appears to be repeating itself.
This time, the focus on Bitcoin was catalyzed by inflows into the 10 US Bitcoin ETFs launched on January 11.
They have so far recorded more than $12 billion in revenue, according to data from Farside Investors.
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Yet, Ethereum failed to capitalize on the rally.
The price of Ethereum in Bitcoin – or ETHBTC – fell to a low of 0.046 in April, creating the largest price gap between the two assets in almost three years.
This means that since ETHBTC peaked in 2022, an investment in Bitcoin has outperformed Ethereum by 44%.
The ETHBTC trading pair shows the price of Ethereum divided by the price of Bitcoin. Traders use this metric to gauge the relative strength of Ethereum against benchmark cryptocurrency Bitcoin.
“Even though some people don’t consider ETH an altcoin per se, its outperformance or underperformance relative to Bitcoin is a powerful metric for trying to understand what type of market we are in,” Nolan said.
If Bitcoin ETFs continue to advance, the price gap between Bitcoin and Ethereum could become more pronounced.
And there is reason to believe that Bitcoin ETF inflows will continue to skyrocket. Hong Kong recently approved the launch of Bitcoin ETFs, which are expected to begin trading on April 30.
Ethereum ETF Approval Seems Unlikely
Although Hong Kong has also approved an Ethereum spot ETF, the chances of U.S. regulators approving similar funds on May 23 – the deadline to approve or reject VanEck’s application – are low.
Bloomberg Intelligence analysts James Seyffart and Eric Balchunas put the chances of approval in May at around 25%.
Likewise, punters on blockchain-based betting platforms Polymarket put the chances of approval at 13%.
This weekBlackRock modified its Ethereum spot ETF application while rival Grayscale filed to convert its Ethereum futures ETF into a spot fund.
Despite this, analysts remain skeptical that a spot Ethereum ETF will be approved in the United States.
“The ETH ETF will almost certainly be rejected in May, which has dampened flows into ETH in already existing countries. [exchange-traded] products,” Nolan said.
Solana steals the show
Among altcoins, Ethereum is the largest, with a market value of $384 billion. But this success is a double-edged sword, according to Nolan.
“ETH has a large market cap and investors have turned to low-cap alternatives,” Nolan said.
A popular alternative is Solana.
Most traders believe that it would be difficult for Ethereum’s market value to surpass that of Bitcoin. So, with Bitcoin boasting a market value of $1.27 trillion, Ethereum traders see limited upside potential.
Despite rising 546% over the past year, Solana’s market cap is relatively small at $64 billion, giving it more room to grow.
Traders are also starting to pay more attention to the price of Solana compared to other cryptocurrencies.
“I have noticed a lot more attention this cycle compared to last cycle to the SOL/ETH and SOL/BTC pairs,” Nolan said.
Signs of hope
There is still hope that Ethereum can stop bleeding against Bitcoin – but not for a while.
The approval of a spot Ethereum ETF should help generate interest. Nolan said he expects an ETF to “probably” be approved in 2025.
Additionally, if the current bull market repeats previous ones, Ethereum should do better over time.
Until then, traders will continue to closely monitor the ETHBTC chart for clues as to where the two major cryptocurrencies are headed next.
Tim Craig is DL News’ DeFi correspondent based in Edinburgh. Contact us with advice at tim@dlnews.com.